Anthem Blue Cross & Blue Shield/Wellpoint in Richmond, Virginia, Sept. 19, 2015. Photo: Diego M. Radzinschi/ALM

After chastising plaintiffs lawyers in the Anthem data breach settlement for their excessive billing, a federal judge has awarded them $31.05 million and approved the $115 million deal.

In a Thursday order, U.S. District Judge Lucy Koh of the Northern District of California approved the fees after concluding that the results were “exceptional.”

Judge Again Says She’s ‘Disappointed’ in Plaintiffs Lawyers in Anthem Data Breach Case

Koh had hired a special master to review the billing records submitted by plaintiffs lawyers, who asked for $38 million for their work on the case. The special master had recommended cutting more than $9 million based largely on the billable hours, but Koh based her decision on a percentage of the fund—about 27 percent. Although still a reduction from the original request, the award is higher than the special master’s recommendation and the U.S. Court of Appeals for the Ninth Circuit’s 25 percent benchmark.

“Here, based on the court’s familiarity with the case, the choice of a percentage does not strike the court as arbitrary or unconnected from the performed work in a way that would create a windfall for class counsel,” Koh wrote.

Also, on Wednesday, Koh approved the settlement, the largest ever in a data breach case.

Anthem Agrees to Record $115M Data Breach Settlement

A spokeswoman for Anthem, represented by Craig Hoover of Hogan Lovells in Washington, D.C., declined to comment.

“Obviously, we’re pleased that the court approved a settlement as amended,” said co-lead plaintiffs attorney Andrew Friedman of Cohen Milstein Sellers & Toll. “We think it’s a really good deal for the class and will provide necessary benefits to them.”

As to the fee order, he noted that Koh didn’t adopt all of the special master’s findings.

“We’re pleased that the judge saw to go with a benchmark,” he said. “Obviously, we’d like more. We always want more. We’ve asked for more. But I didn’t read the tea leaves one way or the other. We didn’t know what to expect. I think she spent her time, gave a well-reasoned opinion for the final order and judgment and, on the fees, as well.”

Friedman was lead plaintiffs attorney with Eve Cervantez of Altshuler Berzon. Also on the case were steering committee members Michael Sobol of Lieff Cabraser Heimann & Bernstein and Eric Gibbs of Girard Gibbs.

Ted Frank of the Competitive Enterprise Institute’s Center for Class Action Fairness, which represented an objector to the settlement and the fee request, also noted Koh’s departure from the special master’s findings.

“The billing practices of class counsel in this case were unconscionable,” he said. “We were glad to save the class $7 million, but given the record and the tenor of the district court’s opinion, class counsel must feel fortunate that their fee was only reduced by 20 percent.”

Koh brought in a special master in February after telling the four lead plaintiffs lawyers she was “deeply disappointed” in their decision to bring in 49 additional law firms on the case.

The special master, retired Santa Clara County Superior Court Judge James Kleinberg, now at JAMS, proposed a 10 percent cut to the billable hours and suggested that the contract attorney rates, which averaged $360 per hour, be set at $156 instead. Plaintiffs lawyers continued to press for their initial request, while Frank’s objector thought the award should have been closer to 15 percent of the fund.

In this week’s order, Koh continued to have reservations about the rates billed for contract attorneys—remarking “how striking the markup is”—and set an hourly rate at $240.

She also agreed that the hours were “almost necessarily excessive,” particularly given that there were 53 law firms on the case. She found that was especially true with hours billed for depositions and settlement. She cut that amount by 13 percent.

She approved a fee award that is more than the Ninth Circuit’s benchmark, however, citing the “novel legal issues and technical subject matter” and the risks inherent in a data breach case. She noted that while the fee percentages were higher in data breach settlements with Home Depot and Target, those cases also included claims by financial institutions that skewed the compensation to consumers.

She also approved more than $2.1 million in costs and expenses and nearly $600,000 in service awards to 105 named plaintiffs.

In her approval of the settlement, Koh found that amendments in April resolved her concerns about potential money left over from a $15 million fund in the settlement earmarked for out-of-pocket costs. The original settlement called for $3.3 million going to cy pres organizations, but the amendments said two organizations, the Center for Education and Research in Information Assurance and Security at Purdue University and the Electronic Frontier Foundation, would receive no more than about $417,000.

Frank pinpointed that part of Koh’s order when praising the settlement’s approval.

“We were glad to see Judge Koh’s thorough decision recognizing the ‘law’s general preference’ against doling out class member funds to unrelated organizations,” he wrote.

Koh also addressed the Ninth Circuit’s ruling this year in In re Hyundai and Kia Fuel Economy Litigation, which, according to some lawyers, imposed stricter requirements on class certification of settlements. She agreed that judges should review various state laws for potential conflicts but found that none existed in the Anthem class, which was never certified.

On July 27, the Ninth Circuit agreed to hear In re Hyundai en banc next month.

The settlement resolves claims by nearly 80 million class members whose personal information was stolen from a data breach in 2014 and 2015. According to court documents, only 1.8 percent have submitted claims to get a variety of benefits including credit monitoring services, alternative cash payouts and cost reimbursements.


Read Koh’s full ruling: